2003 (4) TMI 61 - HC - Income Tax

Alleged undisclosed house investment based only on DVO valuation report, with no search evidence, rejected in block assessment appeal

In block assessment proceedings under s.158BC following a s.132 search, the dominant issue was whether an addition for alleged undisclosed investment in a ... block assessment - notice issued under section 158BC - Search and seizure operation was carried out under section 132 - valuation report without proper explanation - HELD THAT:- On a perusal of the unamended and amended provisions and the Central Board of Direct Taxes circular, we are of the considered view that there has been no specific effect as far as this facet is concerned. Emphasis has been given on the fact that evidence must have been found during the search and only thereafter the question of gathering any material information would arise based on the search inquiry. It is not disputed at the Bar, that during the search in the premises of the assessee nothing was found with regard to the investment in the house. However, it is contended by Revenue, that the valuation report of the Departmental Valuation Officer was obtained and was confronted to the assessee but he was not able to give any explanation and, therefore, it should be accepted as evidence. We are afraid, the aforesaid submission does not commend acceptance in view of the statutory provisions and the law laid down in the case of Vinod Danchand Ghodawat [2000 (6) TMI 13 - BOMBAY HIGH COURT] with which we have respectfully agreed. Thus, we do not find any substantial question of law involved in this appeal. Issues: Whether, for the purpose of determining undisclosed income in a block assessment under section 158BB(1) of the Income-tax Act, 1961, the Assessing Officer can base additions on a departmental valuation report or other expert material obtained after the search when no evidence relating to that investment or expenditure was found during the search.Analysis: Section 158BB(1) defines undisclosed income of the block period as computation based on evidence found as a result of search or requisition and such other materials or information available with the Assessing Officer. The interpretation of this provision must be read in the context of Chapter XIV-B and the principle that post-search inquiries and materials must arise from or be linked to evidence discovered during the search. A departmental valuer's report obtained subsequent to search does not, by itself, convert into admissible evidence under Chapter XIV-B if there was no evidence discovered during the search relating to the investment or expenditure in question. Reliance on statutory powers to collect information or procure reports (including section 131(1)(d)) does not expand the scope of Chapter XIV-B to permit fresh independent valuation reports as a substitute for evidence found in the search when the search disclosed no material on the specific issue.Conclusion: Additions in block assessment based solely on a departmental valuation report obtained after search, where the search produced no evidence relating to the alleged investment or expenditure, cannot be sustained under section 158BB(1). The Tribunal's deletion of the addition is upheld and the appeal is dismissed in favour of the assessee.